Conflicts Disclosure

Chapter 176 is an ethics law. Originally enacted by House Bill (HB) 914 in 2005, Chapter 176 requires local government officers to disclose certain relationships with vendors who conduct business with local government entities.

After the law was implemented, city officials and others realized that the law created several unintended consequences. Consequently, the bill’s author sought an opinion from the Texas attorney general to clarify many provisions of Chapter 176. The attorney general’s office released Opinion Number GA-0446, which concluded that legislative changes to the law were necessary. In response, the legislature passed HB 1491 during the 2007 regular legislative session. More recent amendments were made to Chapter 176 with the passage of HB 23 in the 2015 regular legislative session.

The requirements of Chapter 176 apply to most political subdivisions, including a city. Texas Local Government Code § 176.001(3). The chapter also applies to a local government corporation, board, commission, district, or authority whose members are appointed by a mayor or the city council.

A “local government officer” (officer) under Chapter 176 includes:
- A mayor or city council member
- A director, superintendent, administrator, president, or any other person who is designated as the executive officer of the local government entity
- An agent (including an employee) of the local government entity who exercises discretion in the planning, recommending, selecting, or contracting of a vendor.

Id. §§ 176.001(1), 176.001(4).

An officer is required to file a “conflicts disclosure statement” (statement) in at least 3 situations.
1. An officer must file a statement if the officer or officer’s family member has an employment or other business relationship with a vendor that results in the officer or officer’s family member receiving taxable income of more than $2,500 in the preceding 12 months. Id § 176.003(a)(2)(A). An officer who only receives investment income, regardless of amount, is not required to file a disclosure statement. Id. Investment income includes dividends, capital gains, or interest income gained from a personal or business checking or savings account or other Page 2 of 4 similar account, a personal or business investment, or a personal or business loan. Id. § 176.001(2-d).
2. An officer is required to file a statement if the officer or officer’s family member accepts one or more gifts from a vendor that has an aggregate value of more than $100 in the preceding 12 months. Id. § 176.003(a)(2)(B) (a “gift” includes transportation, lodging, and entertainment, even as a guest). An officer is not required to file a statement in relation to a gift, regardless of amount, if the gift: (1) is a political contribution; (2) is food accepted as a guest; or (3) is offered on account of kinship or a personal, professional, or business relationship independent of the official status of the recipient. Id. §§ 176.001(2-b), 176.003(a- 1).
3. An officer is required to file a statement if the officer has a family relationship with the vendor. Id. § 176.003(a)(2)(C).

There is at least 1 exception to the 3 situations set out above. A local government officer does not have to file a statement if the vendor is an administrative agency supervising the performance of an interlocal agreement. Id. § 176.003(a-2).

(Note: An officer is required to file a statement no later than 5 p.m. on the 7th business day after the date on which the officer becomes aware of facts that require the filing of a statement. Id. § 176.003(b).)

A vendor is any person who enters or seeks to enter into a contract with a city. Id. § 176.001(7). The term includes:
- An agent of a vendor
- An officer or employee of a state agency when that individual is acting in a private capacity to enter into a contract
- Texas Correctional Industries (but no other state agency). Id.

An officer has a family relationship with a vendor if they are related within the third degree by consanguinity (blood) or second degree by affinity (marriage). Id. § 176.001(2- a). An officer’s family relationships within the third degree by blood include the officer’s: mother, father, son, daughter, brother, sister, grandmother, grandfather, grandson, granddaughter, great-grandfather, great-grandmother, aunt, uncle, nephew, niece, great-grandson and great-granddaughter.

An officer’s family relationships within the second degree by marriage include the officer’s: spouse, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepchild, sister-in-law (brother’s spouse or spouse’s sister), brother-in-law (sister’s spouse or spouse’s brother), spouse’s grandmother, spouse’s grandfather, spouse’s granddaughter, and spouse’s grandson.

An officer’s family member is a person related to the officer within the first degree by consanguinity (blood) or affinity (marriage). Id. § 176.001(2). An officer’s family member includes the officer’s: father, mother, son, daughter, spouse, father-in-law, mother-in-law, son-in-law, daughter-in-law, or step child.

The law applies to any written contract for the sale or purchase of real property, goods (personal property), or services. Id. § 176.001(1-d), (2-c). A contract for services would include 1 for skilled or unskilled labor, as well as for professional services. Id. § 176.001(6).

A vendor is required to file a “conflicts of interest questionnaire” (questionnaire) if the vendor has a business relationship with the city and:
- Has an employment or other business relationship with an officer or an officer’s family member that results in the receipt by the officer or family member of taxable income of more than $2,500 in the preceding 12 months
- Has given an officer or an officer’s family member one or more gifts totaling more than $100 in the preceding 12 months
- Has a family relationship with an officer. Id. § 176.006(a).

(Note: A vendor is required to file a questionnaire not later than the 7th business day after the later of the following:
- The date the vendor begins discussions or negotiations to enter into a contract with the city or submits an application or response to a bid proposal
- The date the vendor becomes aware of an employment or business relationship with an officer of officer’s family members, gives a gift to an officer or officer’s family member, or becomes aware of a family relationship with an officer. Id. § 176.006(a-1).)

The statements and questionnaires must be filed with the records administrator of the city. Id. §§ 176.003(b), 176.006(a-1). A records administrator includes a city secretary, a person responsible for maintaining city records, or a person who is designated by the city to maintain the statements and disclosures filed under the chapter. Id. §176.001(5).

A city that maintains a website is required to post on that website statements and questionnaires that are required to be filed under the chapter. Id. § 176.009. However, a city that does not have a website is not required to create or maintain one. Id.

(Note: A records administrator must also maintain a list of local government officers and make it available to the public and any vendors that may be required to file a questionnaire. Id. § 176.0065(1).)

An officer or vendor who knowingly fails to file a statement or a questionnaire when required to do so commits either a Class A, B, or C misdemeanor, depending on the amount of the contract. Id. § 176.013.

A Class C misdemeanor is punishable by a fine of up to $500. A Class B misdemeanor is punishable by a fine up to $2,000, confinement in jail for a term not to exceed 180 days, or both. A Class A Misdemeanor is punishable by a fine up to $4,000, confinement in jail for a term not to exceed 1 year, or both.

It is an exception to an offense if the officer or vendor file the statement or questionnaire not later than the 7th business day after receiving notice from the city of the alleged violation. Id. § 176.013(f)-(g). In addition to possible criminal punishment, a city may reprimand, suspend, or terminate an employee who knowingly fails to comply with the requirements of Chapter 176. Id. § 176.013(d). And the city council may declare a contract void if the council determines the vendor failed to file a questionnaire. Id. § 176.013(e). (Note: The validity of a contract between a city and a vendor is not affected solely because a vendor fails to file a questionnaire. Id. § 176.006(i).)